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The United States Senate on Tuesday began debating patent reform legislation that would make the first significant reforms to the US patent system in nearly 60 years.

HR 1249, the Leahy-Smith America Invents Act, passed the House in June with more than 300 votes, and included most provisions adopted by the Senate in March when it passed the Senate version, S. 23, by a vote of 95-5. Lead senators are pushing for passage of the bill as is, to avoid any further delay.

“An improved patent quality will benefit business across the economic spectrum,” said Sen. Patrick Leahy, the Vermont Democrat who heads the Senate Judiciary Committee and who sponsored S. 23.

Leahy noted that the legislation will create a streamlined first-window post-grant review process to quickly challenge and “weed out” patents that he says shouldn’t have been filed in the first place. The bill will also help reduce the 700,000 patent application backlog facing the US Patent and Trademark Office (USPTO) – a point being hammered home by those in favour of the bill, who argue its elements are vital to boosting a flailing US economy and stimulating job growth.

“Those are patents that could be creating jobs that could be improving our economy. Let’s get them done,” Leahy said, vowing to vote against any amendment offered.

“Every day we wait, every day we delay, is another day we hold back the innovative genius of America,” he continued. “Any amendment, including ones I may like, will force reconsideration by the House, more unnecessary delay, and longer before we can create those jobs, longer before we can innovate, longer before we can compete with the rest of the world.”

Although Leahy said there are “half a dozen” amendments he would like, “I will vote against them because it’s time to get this done.”

One such amendment is sponsored by Sen. Tom Coburn, an Oklahoma Republican who wants to ensure there is absolutely no fee diversion from the US Patent and Trademark Office to non-patent uses. He says that this year, Congress will “steal” about $80 million from a fund of USPTO user fees that should have been solely dedicated to patent office administration.

“Fee diversion is an arcane injustice that does not capture the public’s imagination as easily as outrages like Bridges to Nowhere, stimulus turtle tunnels, and shrimp on a treadmill. Still, fee diversion is no less offensive,” Coburn wrote in the National Review Tuesday. [http://www.nationalreview.com/corner/276344/patent-fee-diversion-tax-innovation-sen-tom-coburn] “Fee diversion saps the lifeblood of the American economy – innovation and invention – in order to subsidize the desire of career politicians and appropriators in Congress to avoid hard choices. Fee diversion operates like a tax on innovation, because it requires entrepreneurs to spend more money and time on activities than they would otherwise if patent fees remained fees. And we know that if Congress wants to produce less of something – in this case, jobs and innovation – tax it.”

The Senate will resume deliberations on Thursday, and will consider and vote on about five amendments, one of which is Coburn’s.

Industry groups and individuals are involved in last-minute pushes for passage of the bill. The US Chamber of Commerce on Tuesday sent a letter to the Senate, supporting the bill – especially Section 22, which would ensure that all fees collected by the USPTO can be used without strings attached.

“Though the PTO funding compromise embodied in the House-passed bill could be strengthened to match the fee diversion provision originally passed by the Senate, as crafted, Section 22 represents a meaningful step toward ensuring that PTO has better access to the user fees it collects, and would better allow the agency to address the current backlog of 1.2 million applications waiting for a final determination and pendency time of three years, as well as to improve patent quality,” wrote Bruce Josten, executive vice president for government affairs at the Chamber.

Microsoft also urged passage, noting that the bill accomplishes the “three core goals supported by large majorities in both Houses and a broad range of stakeholders across industries and the university community.” That is: ensuring that the USPTO has access to the funding it needs; moving the US to adopt a “first inventor to file” system, enabling greater harmonisation of patent processes with those of other countries; and establishing additional administrative tools, including a new post-grant review procedure, to help eliminate questionable patents.

But not everyone is looking forward to a hasty passage of the bill.

“Let’s be honest in this mostly dishonest process – this patent reform will do nothing to improve issued patent quality or pendency,” said Greg Aharonian of the Internet Patent News Service, who urged people to send Coburn emails and call his office to help get his fee diversion amendment back in the bill. “Legislating the theft of PTO fees, at the $300 million/year level once the budget Super Committee fails in 2012, will destroy the PTO saddled with new responsibilities.”

[Update] But Leahy stressed what many House members in support of HR 1249 have stressed in the past in regards to fee diversion – that the language in the House bill does, in effect, allow the USPTO full access to the fees it collects. The difference is the type of fund the House establishes for these fees; it will keep the USPTO within the normal appropriations process with the usual congressional oversight that accompanies that process.

The House-created fund will “reduce any incentive to divert fees from the PTO, to provide the PTO to all fees it collects,” Leahy said. “In effect, they’re doing what we’ve asked, but staying within the House rules.”

“We shouldn’t kill this bill over this amendment – we should reject the amendment and pass the bill,” he said.

The exact language of Section 22 of HR 1249 regarding these funds is as follows [pdf]: “Any fees that are collected under sections 41, 42, and 376, and any surcharges on such fees, may only be used for expenses of the Office relating to the processing of patent applications and for other activities, services, and materials relating to patents and to cover a share of the administrative costs of the office relating to patents.”

A summary of HR 1249 by Chicago law firm Brinks Hofer Gilson & Lione is available here.

There are many groups say the bill will favor big business over small ones and individual inventors. The National Small Business Administration, for one, argues that the legislation will “irreversibly damage the ability of small-business owners and entrepreneurs to create, develop and commercialize their innovations.” “To think this bill will have anything but negative implications on job creation is absurd,” said NSBA President Todd McCracken.